Fixed Deposit (FD)

A FD is a type of financial instrument offered by banks and it allows individuals to deposit sums of money for fixed periods of time, like 1 month, 6 months, 1 year, 5 years etc. In general, fixed deposit accounts offer a higher interest rates than savings accounts. Fixed deposits are regarded as safe investments and help people to grow their financial assets without exposing them to volatility and other risks associated with the financial market. Most of the banks offer fixed deposit accounts in India and the interest rates offered with these accounts depend on the tenure of deposit and other factors. The tenure offered with fixed deposits can range from 7 days to 10 years, whereas the interest rate offered can be as high as 9% per annum. Some of banks even offer tax saving fixed deposits that offer tax benefits to customers.

5 Features of Fixed Deposit Account

The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds (extra money).

The amount can be deposited only once. For further such deposits, separate accounts need to be opened.

The depositor is given a fixed deposit receipt, which depositor has to produce at the time of maturity. The deposit can be renewed for a further period.

As per the Traditional scheme, the interest on the FD account is credited to the Savings account specified by the depositor on a monthly basis or on a quarterly basis. For the Reinvestment scheme, the interest is compounded to the principal amount on a quarterly basis.

Tax is deducted at source, from the interest on Fixed Deposits, as applicable, as per the Income Tax Act, 1961.

Types of Fixed Deposits

There are various types of fixed deposit accounts that are available in India and investors can choose from the wide range of investment options based on personal and financial needs.

Normal/Standard Fixed Deposits

This is one of the most common fixed deposit accounts. It is also one of the most basic and uncomplicated forms of investment. A fixed sum of money is deposited for a certain pre-determined period of time and a certain interest rate is provided on the same.

Features

Fixed tenure

Standard interest rates

Easy investment

Secure

Special Fixed Deposits

These types of fixed deposits come with certain special benefits or perks when compared to the ordinary fixed investment plan. They usually offer higher rates of interest. One can also generally take a loan on these types of fixed deposits.

Features

Higher rate of interest

Special offers

Additional benefits

Tax Saver Fixed Deposits

These type of fixed deposit accounts are usually for a longer tenure that ranges between 3 to 5 years, or more. Therefore, they come with a lock-in period and one cannot break these deposits or withdraw them prematurely, unless in the event of death of the account holder. The main advantage of these deposits is that one can claim tax exemption under Section 80C of the Income Tax Act.

Features

Cannot be broken until completion of tenure

The interest gained on these deposits are taxable

Cumulative Fixed Deposits

When it comes to cumulative fixed deposits, the interest earned on this will not be available or paid to the policyholder at regular intervals. Instead, interest will be paid only upon completion of the fixed deposit tenure along with the principal amount.

Features

Interest paid with principal at the time of maturity

Not ideal for those without a regular income like pensioners etc.

Interest is compounded on a weekly, bi-weekly, monthly, quarterly, half-yearly or yearly basis

This leads to higher gains, making it a more profitable form of investment

Non-Cumulative Fixed Deposits

In the case of non-cumulative fixed deposit, the bank pays the account holder the interest earned on the principal amount at regular frequencies.

Features

Good option for pensioners

Extra income

Account holder can choose at what interval dividend should be paid

Usually one tends to earn lesser on the whole in this scheme when compared to cumulative fixed deposit scheme

Flexi Fixed Deposits

A flexi fixed deposit is a type of fixed deposit account where the savings account is linked with the term deposit.

What Are the Benefits of Fixed Deposit ?

Assured returns: One of the main advantages of having a fixed deposit (FD) account is that it provides guaranteed returns on the investment. Hence, there is no risk involved in FDs when compared to other types of investments like mutual funds, debt funds, etc. Therefore, a fixed rate of interest will be paid on the investment amount.

Very easy to open an FD account: It is a very easy to open an FD account and this can be done online in a matter of minutes. One can open FD accounts online in most of the major banks across the country with minimum documentation.

Encourages Saving: Opening an FD encourages the habit of putting aside money for the rainy days of life. This inculcates the discipline of saving money for the long term.

Higher rate of interest: FD accounts offer a higher interest rate when compared to savings accounts or other types of term deposit accounts like recurring deposits, etc. There are many banks, non-banking financial companies and other financial institutions that offer an attractive rate of interest.

Flexibility: FD gives the account holder the flexibility to choose the amount of money he/she wants to invest and also decide on the tenure range. One can make investments for a minimum period of 7 days and maximum period of 10 years. There are some banks that also offer FDs for more than 10 years.

Multiple accounts: One can hold multiple FD accounts at the same time without any hassle. For example, an individual can hold 2 or 3 FD accounts in the same banks. One can also hold FD accounts across different banks.

Tax benefit: There are tax saver FDs that offer tax benefit under Section 80C of the Income Tax Act. One can invest up to Rs.1,50,000 and claim tax exemption for the same. However, most tax saver FDs have a lock-in period of 5 years.

Helps beat risk: Opening an FD account is the best financial instrument to beat risks that arise from investing in other high-risk financial instruments such as stocks, mutual funds, etc. This helps manage financial risk on a long-term basis.

Avail loan on FD: One can avail a loan in times of financial crisis on the FD amount. An individual can take up to 90% of the FD account amount as a loan. Please note that the account holder will still earn interest on the remaining amount left in the account.

Minimal to no risk investment: FDs are minimal to no risk investments. One need not spend sleepless nights or worry about losing money in this type of investment.

Highly liquid investments: FDs offer the customer the advantage of liquidity. In case there is a cash crunch or any other type of financial emergency, one can always close the FD or make an overdraft withdrawal from the same.

Interest can be paid quarterly: One can supplement one's income and earn a fixed sum on interest on a monthly, quarterly or half-yearly basis. For instance, in cumulative FDs, the interest amount is credited to the account of the FD holder on a regular basis. This comes in handy for those who do not have a regular source of income like pensioners etc.

FAQs of FD

How does a fixed deposit account work?

A fixed deposit allows an individual to keep a certain amount of money with a lender/bank for a certain duration of time for which he/she can earn a certain interest amount. The interest earned on an FD account is calculated based on the deposited amount and the term of the account. An FD account with a higher deposit amount will attract higher fd interest rates and likewise. The individual can choose to deposit a certain amount of money for a minimum of one month and a maximum of five years. As the name sounds, a fixed deposit account doesn’t provide the facility to withdraw the fund before the maturity, however, should the need arise, the account holder can liquidate the funds for a much lesser interest rate. The customers need to keep in mind that the interest earned on an FD account is subject to income tax.

Can I break my fixed deposit before maturity?

Yes, a fixed deposit account can be liquidated before maturity, however, the interest payable will be lesser than what is given at maturity of the account. The account holder will need to get in touch with the bank or use the net-banking service (subject to availability) to liquidate the fixed deposit account at any time during the term.

What is meant by cumulative fixed deposit?

A fixed deposit account is provided under either a cumulative or non-cumulative deposit scheme. Under a cumulative fixed deposit account, the account holder is entitled to the interest that is payable at the account maturity along with the principal amount. In cumulative deposits, the interest is accumulated with the deposit amount, which is eligible to earn compounding principle interest on monthly/quarterly/annually basis. Whether the account reaches the maturity or subject to premature withdrawal, the principal, as well as the accumulated interest amount, is paid to the customer at the end of the term.

What is good, FD or RD?

A FD is an investment plan where a lump sum is put aside for a fixed period of time to earn interest.

A recurring deposit (RD) account is a type of investment plan where a certain sum of money is deposited every month or at set intervals of time for a fixed tenure. Interest is earned on the same.

The interest earned on an FD will be much higher than that earned, for the same amount and interest rate, on an RD. Therefore, it always wise to choose an FD over an RD.

Is fixed deposit tax free?

Those investing in a tax saver fixed deposit can claim exemption under Section 80C of the Income Tax Act. The sum invested towards this will be deducted and will not be a part of the taxable income.

However, one must note that the interest earned on such term deposits will be taxable based on the tax bracket of the individual.

Is fixed deposit under 80C?

Only in case of tax saver fixed deposits, exemption can be claimed under Section 80C of the Income Tax Act. For other types of fixed deposits, interest earned will be taxed and exemption cannot be claimed under this section.

What is non-cumulative fixed deposit?

A non-cumulative fixed deposit scheme is an investment plan where the interest is payable at regular intervals, which may be payable on a monthly, quarterly or half yearly basis, depending on the type of bank. This ensures that the investor is earning interest at regular frequencies on the fixed deposit. On the other hand, in a cumulative fixed deposit account, interest is payable only upon maturity along with the principal amount.

Fixed Deposit Nomination Rules India

A nominee is a person who is chosen by the fixed deposit (FD) holder as the one who will have a legal right over the money in the FD account in case of demise of the FD holder

Even if there is any rival claim, the amount in the FD account must be paid to the nominee. The nominee will be entitled to get the FD money even if a claim is made by a legal heir

A nominee need not always be a family member or legal heir

As per rules, in most cases, banks will allow the GD account holder to nominate only 1 individual

One can change the nominee or cancel the nomination at any point of time by filling a simple application form

In case the individual holds many FD accounts at the same time, he/she can nominate different individuals for different accounts

In case the FD account holder has not made any nomination, the money will be transferred to the account of the legal heir after his/her demise

If the account holder has not nominated anyone while opening a fixed deposit but wants to do so at a later stage, it can be done

A nomination can be made by filling up the nomination form and submitting valid documents

For all joint FD accounts, the nomination process will be carried jointly by both the FD account holders.

All nominations can only be made in individual capacity and cannot be made in official capacity. This means that one cannot use any official designations for the purpose of nomination

If the nominee is a minor, the term deposit holder will have to mandatorily appoint another nominee who will receive the money on the behalf of the minor.

In most cases, one can only nominate individuals and not organizations. However, certain exceptions can be made to nominate trusts, etc.

A nominee will be the first person the bank will contact in case the FD account holder dies

Withdrawal –

Amounts up to Rs.20,000 can be withdrawn in cash. Amounts above Rs.20,000 have to be transferred to the customers savings account or current account or paid-out through a crossed cheque.

Sweep-In facility / Flexi-Deposits: Withdrawals allowed on interest accrued on an FD. The balance is then held as a new deposit.

Tax-saving deposits: No withdrawals allowed for 5 years minimum

Either of the two are executed based on the account-holder’s instructions without which the deposit will be automatically renewed.

Fixed Deposit Receipt has to be surrendered upon renewal or withdrawal.

Premature Withdrawal of Fixed Deposit

Premature withdrawal or Breaking a fixed deposit means withdrawing the money before the maturity expires. This may be necessary if you urgently require the funds or if there are better investment opportunities elsewhere. Many people want to close their old Fixed Deposit account before maturity and open a new account when they see the current interest rates on fixed deposits in the market much higher than rate of interest at which they have opened FD sometime back.

Most of the banks charge premature withdrawal penalty in the form of a 0. 5-1% lower interest on customers looking to close their Fixed Deposit

In the event of the FD being closed before completing the original term of the deposit, interest will be paid at the rate applicable on the date of deposit, for the period for which the deposit has remained with the Bank, with premature closure penalty.

Partial Withdrawal of Fixed Deposit

The Bank on request from the depositor, will allow withdrawal of term deposit before completion of the period of the deposit as per terms agreed upon at the time of placing the deposit. For such premature withdrawals and partial withdrawals, the Bank will levy a penalty of 1%, on the applicable rate. Partial withdrawal is permitted in units of Rs 1,000. The balance amount earns the original rate of interest.

Fixed Deposits for NRI

Non-Resident Ordinary (NRO) Rupee Accounts are maintained by non-resident Indians (NRI) in Indian Rupees, to keep funds that belonged to them before they turned NRI. These accounts can also be used to account for fresh earnings in Indian Rupees even after the individual has turned an NRI, from such sources as house rent, dividend and interests, salary etc. The interest earned from such accounts is taxable as per the Indian income tax regulations. Currently, Indian banks offer an interest rate from 8-10% on fixed accounts that fulfil the NRO parameters.

Alternatively, a Non-Resident External (NRE) Rupee Accounts are maintained by non-resident Indians (NRI) in Indian Rupees and are meant for foreign exchange that is earned in their country of residence and then transferred to India. The interest earned from such accounts is tax free and the funds can be moved around to other accounts without any restrictions. Currently, Indian banks offer an interest rate from 7-10% on fixed accounts that fulfil the NRE parameters.

Fixed Deposit Tips

4 golden rules of investing

Many first-time investors make the mistake of investing in products that they do not know much about. We can help you there. Here are a few rules of investing. Waiting to get started?

Understand Investments

Don’t put your hard-earned money into unknown avenues. Learn all you can about an investment product before you invest. Identify your financial needs and choose investments that suit your goals.

Do Not Time the Markets

Follow only one mantra while investing. Buy low and sell high. Avoid trying to time the markets. Invest for the long term to beat market volatility.

Be Realistic In Your Expectations

Just because some funds promise high returns, don’t expect them to make you rich overnight. Review your investments for profits over a long term.

Track Your InvestmentsRegularly

Remember to keep a watch on the performance of your investments. Rebalance your portfolio at regular intervals based on market trends.

Successful investing is all about making the right decisions at the right time. Are you ready to make your money work for you?

Fixed Deposit Advantages and Disadvantages

Fixed deposit accounts provide a stable platform for investors to earn a guaranteed return on investment on their deposits with low or no market risks. A fixed deposit or term deposit account comes with a tenure which can easily be opened and liquidated if needed (subject to charges and terms of the account). There are various types of FD accounts that provide tax benefits to the investors. An FD account has its own advantages and disadvantages which are outlined below to help you make an effective investment decision.

4 Advantages of Fixed Deposit

FDs are popular for offering a safe avenue for investment which can provide tax deduction under Section 80C of the Income Tax Act, 1961. Over the years, people have been investing in FD accounts to avoid any kind of market risk while being certain about a earning a decent interest. Moreover, the other avenues of investment may provide a higher return provided the investor is willing to accept the risk factors. The following factors are few of the distinct advantages of investing in an FD accounts:

Risk factors - An FD account provide relief to the investor by facilitating a safe platform for investment. The other investment avenues such as mutual funds, stocks, debt funds, unit linked insurance plans, etc. carry market risk based on the type of the investment fund. Considering the fact that the investment is safe with an FD account, the majority of investor choose FD accounts over other investment options. Moreover, RBI’s regulation for taking up an insurance on the FD account enables the investor’s account to be insured for up to Rs.1 lakh.

Loan options - In the event of an emergency situation, the investor can choose to avail a loan on the FD account for a lower interest rate. The interest rates for such loans are typically lower than the market rate for other types of loans. Hence, an FD account can come handy when the investor needs to take a loan. Most FD accounts offer up to 90% of the FD value as the loan amount.

Flexible interest payouts - Based on the investor's requirements and type of the FD account, the interest is paid out at regular or periodical intervals. The investor can choose to receive the interest payouts on either annual or monthly basis along with an option to withdraw the interest at maturity.

A higher interest rate for senior citizens - Most FD accounts offer a higher rate of interest for senior citizens which makes it popular even among the retired investors.

3 Disadvantages of Fixed Deposit Account

Though an FD account offers safety and decent income through interest, it has its own drawbacks. Nowadays, most investors are finding different avenues to increase the earning potential. Additionally, other avenues of investment disclose the level of risk anticipation based on the investor's financial goals and other needs. There are certain types of investment options that allow the investors to switch their investment fund during the term of the scheme for a nominal or no charges at all. Moreover, certain accounts set a threshold for market risk exposure which helps in securing a certain amount of fund before the risk factors impact the accounts severely. In order to decide whether to invest in an FD account or not, an investor must consider the following disadvantages of an FD account:

Earning potentials - It’s a known factor that an FD account is the not the best avenue of investment for maximum return. Though it offers safety, it lacks the higher returns what other investment options are capable of offering. There are certain banks and non-banking financial companies (NBFCs) who offer a higher rate of interest on the FD accounts, however, the earning potential is still lower than most investment options.

Liquidity factor - An FD account comes with a fixed tenure and the investor is expected to hold the account until maturity to be eligible for the complete earning, however, if he/she decides to liquidate the account before maturity, only a partial interest earning is provided. Moreover, the liquidation fee also contributes to the low earning of a premature FD account. Depending on the type of FD account and the financial institution, the investor may choose to wait for a specific period within the fixed tenure to avoid heavy premature withdrawal charges. There are certain financial institutions that offer a decent interest earning if the investor decides to wait for at least a year or two before liquidating the account before maturity.

Tax benefits - Unfortunately, tax benefits are applicable for certain types of FD accounts only (known as tax-saver FDs). Moreover, in case of a joint-account, only the first account holder is eligible for tax benefits under the Section 80C of the Income Tax Act, 1961.

While making an investment decision for an FD account, the investor must assess his/her financial situation in order to determine his/her financial goals. An FD account has been the popular choice of investment for most conservative investors since it eliminates the market risk and ensures a guaranteed return irrespective of market condition, however, there are various other investment options that offer a higher return based on the risk appetite of the investors. Before making an investment decision, investors are advised to compare various types of FDs and other investment option in order to make a better decision. The tax benefits are based on the current tax rules which are subject to change.

Also Know About

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News About Fixed Deposit

Why invest in fixed deposits?

Investing in fixed deposits is a lucrative option. This is because it assures an individual guaranteed return irrespective of the market condition. While individuals are prompted to invest in fixed deposits because of the aforementioned reason, there are other reasons as well why one should invest in FDs offered by various banks and Non-Banking Financial Corporations (NBFCs). Let us take a look at them.

Investing in long-term term deposits enable you to get higher returns.

Depending on the financial needs, different amounts can be invested in separate investment tenures.

Investing in FDs help you fund your immediate needs as lenders offer loans against the term deposit.

Several banks in the country offer the option of investing in FDs with attractive returns. Banks like SBI, HDFC, ICICI Bank etc. offer interest up to 7.5% p.a. on different tenures. Some smaller banks and NBFCs offer up to 8% p.a. for investing in term deposits.

6 May 2019

PCoB announces no NPAs for the upcoming decade

Pratap Cooperative Bank (PCoB) has declared zero Non-Performing Assets (NPA) for the next ten years. Based in Maharashtra, this bank offers a range of investment-related and credit-based products. The interest rate for a personal loan lies between 12% p.a. and 18% p.a., cash credit at 13% p.a. and education loan at the rate of 12.50% p.a. Home loans can be availed at 9.75% p.a. for a tenure of 5 years, 10.25% p.a. for a tenure of 10 years and 10.75% p.a. for a tenure range between 15 years and 20 years.

The bank also offers Fixed Deposit (FD) schemes. The FD rates for a tenure between 15 days and 3 months is 5.5.% p.a. 6.50% p.a. is the rate for a tenure from above 3 months to 6 months. The highest interest rate is 7.50% p.a. for an FD with a maturity period within the range of 13 months and 2 years. For a Term Deposit lasting from 25 months to 3 years, the interest rate offered by the bank is 7.00% p.a. One can get an FD interest rate of 7.25% p.a. for availing a Fixed Deposit within a maturity range of above 6 months to 1 year.

9 January 2019

FD rates offered by PNB, SBI, HDFC Bank and ICICI Bank

On 1 January 2019, the Punjab National Bank (PNB) revised its Fixed Deposit rates for select tenures. The rates for an FD with the tenure from above 1 year to 3 years has increased from 6.50% p.a. to 6.75% p.a. The new interest rate for an FD within 6 months to less than 1 year is 6.50% p.a. The Fixed Deposit rate for deposits with a tenure between 46 days to 90 days has rose to 6.55% p.a. from 6.35% p.a.

State Bank of India (SBI) offers an interest rate of 6.70% p.a. for a Term Deposit with a tenure of 1 year. The highest FD rate by SBI is 6.85% p.a. for a maturity between 5 years and 10 years. The range of interest rates is from 5.75% p.a. to 6.85% p.a. On the other hand, HDFC Bank provides 7.30% p.a. on an FD with a maturity of 1 year. This bank offers a maximum interest rate of 7.40% p.a. for a maturity bracket from above 2 years to 3 years.

ICICI Bank provides Fixed Deposit schemes for interest rates between 4.00% p.a. and 7.50% p.a. You can get an interest rate of up to 7.50% p.a. for a tenure from above 2 years to 3 years. The FD rate for a maturity period of 1 year to 389 days is 6.50% p.a.

9 January 2019

Key Features of SBI MODS

State Bank of India (SBI) is one of the leading banks of the country. It offers a multitude of financial products and services to its customers. One of the main products offered by the bank is Fixed Deposits (FDs) or Term Deposits. SBI Multi Option Deposits (MODS) is one the variants of Term Deposits. This scheme comes with high liquidity. The investor can withdraw funds in multiples of Rs.1,000. The remaining amount in the account continues to give them an interest income. An SBI MODS account can be created by visiting the nearest SBI branch or through netbanking.

One needs to make a minimum deposit of Rs.10,000 to maintain an SBI MODS account. One can pick a maturity period between 1 year and 5 years. One can make premature withdrawals from the FD account. The interest income is taxed with Tax Deducted at Source (TDS) as prescribed by Income Tax Act, 1961. The account holder can appoint a nominee for the scheme. They must maintain a minimum balance in their Savings Account linked to the MODS account.

11 December 2018

Suryoday Bank offers FD rates up to 9.00% p.a.

Suryoday Bank is one of the most popular private sector banks. One can avail Suryoday Bank Fixed Deposit (FD) schemes for an interest rate between 4.00% p.a. and 9.00% p.a. A depositor can choose a tenure within the range of 7 days and 10 years. Senior Citizens get an interest rate which is 0.50% higher than the standard rates.

The highest FD rates offered by Suryoday Bank to the general public and senior citizens are 9.00% p.a. and 9.50% p.a. respectively for a tenure of 950 days. The second highest rate for the general public is 8.75% p.a. for a maturity period above 2 years to 3 years. If one invests in an FD for a tenure between 1 year and 2 years, they would get an interest rate of 8.50% p.a. The FD rates for Suryoday Bank are 4.00% p.a. for a tenure between 7 days and 45 days. The interest rate for a tenure above 5 years to 10 years is 7.25% p.a.

11 December 2018

Should People Invest In FDs?

Yes, people should invest in fixed deposit, especially in the current scenario of the market. Since banks and NBFCs have increased the rate of interest on FDs, it is not only safe and risk-free, it also guarantees increased returns.

FDs are one of the best ways to deposit your hard earned money and save it along with earning high rates of interest. Even though liquidity is a drawback when it comes to FDs, it is an indirect way to secure your savings without any scope of unnecessary expenditure.

Senior citizens are entitled to an additional interest of 0.50% per annum which is a safe way of saving money without risking it out in the stock market.

The investors who do not wish to risk their money and would want to expect guaranteed returns, fixed deposit is the answer.

5 December 2018

Fixed Deposit Interest Rates Higher For Nbfcs Than Banks. Which Should You Invest In?

The monetary policy review by the RBI has included an increase of the repo rate by 25 basis points. In the last 3 policy reviews, the repo rate was raised twice which resulted in an increase by 50 basis points which sums up to 0.50% per annum.

Now as the banks have incorporated the review and increased the interest rates on the fixed deposits, Non-Banking Financial Corporations(NFBC) have followed the same to keep up.

Since NBFCs are privately owned, the rate of interest they offer for fixed deposits are comparatively much higher when compared to banks.

For example, in October, Bajaj Finance Limited which is NBFC, increased its fixed deposit from 8.40% per annum to 8.75% per annum. When compared to Bajaj Finance, one of the major banks in the country, State Bank of India offers an interest rate of 6.85% per annum only.

However, even though higher interest rates are offered by NBFCs, it should not be the only criteria which is considered to apply for a FD account.

Saving money for the future is something each and everyone does. Whether it is in the form of savings account, investing in mutual funds, fixed deposit accounts, provident funds, etc.

However when you have a child, every aspect of your child does require funds. One of the most important aspects which requires planning and saving is education.

The price of education has seen a steep rise since the last 10 years. If you want your child to get educated from a good and reputed school and then college, financial planning, investing and saving is very important.

In the former years, most parents relied on their savings or invested in RDs and FDs to deposit money for their child’s future. However, now there are other investment options to choose from such as a the Public Provident Fund and the Sukanya Samriddhi Account launched by the Government.

On 12 October 2018, the statement of position of scheduled banks, loans given by the bank were higher by Rs.13,544 crore, compared to deposits which showed a degrowth by Rs.14,567 crore.

Due to this, banks or lenders have been facing pressure to increase the deposit rates in order to grow as per the Reserve Bank of India.

One of the ways which banks would be able to increase the deposits, would be during the time of the festival when credit growth is higher, especially as non-banking financial corporation are facing liquidity issues due to the IL&FS imbroglio. Hence they can offer higher interest rates on fixed deposits in order to encourage people to opt for a fixed deposit.

AU Small Finance Bank, based in Jaipur have increased their interest rates on fixed deposits from 8% per annum to 8.50% per annum for a tenure of more than 18 months to 2 years.

The latest Monetary Policy Report, which was released by the RBI, mentioned that the latest policy rate was given in June 2018. However, banks had been increasing their interest rates on fixed deposits, since December 2017 even before the latest policy rates were given.

The report also observed that the share of current accounts and savings account deposits from the bank fell from 41.1% in March 2018 to 39.6% in the middle of September 2018. The cost taken to fund the banks felt the increased pressure due to this dip.

29 October 2018

Delhi HC questions RBI over fixed deposits’ Protection

The Reserve Bank of India (RBI) has been asked by the Delhi High Court about the details of the protection plans the former has for customers who have deposits of over Rs.1 lakh in case a bank fails.

Declaring the matter to be of public importance, the court asked DICGC - Deposit Insurance and Credit Guarantee Corporation and the Centre to file affidavits in response to the query.

This happened during a PIL hearing that challenges the decision of DICGC, an RBI subsidiary, of providing insurance cover of only up to Rs.1 lakh per customer, irrespective of their deposits of any kind.

In their reply, the DICGC and the centre replied to the court that the Rs.1 lakh cover is only meant as an immediate and temporary relief and isn’t the final amount if a bank fails. A couple of months ago, it was widely reported that the centre had declined proposals of raising the insurance cover to Rs.15 lakhs.

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